Saturday, 10 August 2019

What Documents Do You Need To Get Preapproved For a Mortgage Home Loan?

What Documents Do You Need To Get Preapproved For a Mortgage Home Loan?

This is going to be the shortest most compact course you have ever read on how to know whether you want to get pre-approved, use someone else's credit so you can make that deal happen.

Alright, you want to get out there and it's time for you to crush it in real estate and pre-approval is one of the first things that you want to do, so that you can know what you are equipped with. You might be in a position right now to buy real estate based on your credit situation or you might not. Either way, as a bonus, I am going to show you how you can get real estate no matter what.

But first, let's talk about that Pre-approval

Let's talk about how you make that happen. It comes down to the fact that we have all these banks and all of these banks are basically saying "What programs do we have for you?" And all these programs are a little bit different, you need to know that not every bank is credited equally.

When I was preparing to buy my first property, I was pushing the limit, I had barely 2 years of work history, I had just gone from part-time pay up to full-time pay. and I walked into a bank that I had been banking with for years, for the preapproval process, guess what they did? They denied me.

And I am like, crap! in my mind, I am like, are all banks the same? I went to another popular bank in the area, I went through that whole process and you know what, I got denied again. I only had a couple of weeks left to finish my loan before this house.

But later, I got smart, Instead of going to a bank, I went to a broker. Now, in lending, a broker is different, this is someone that works with many banks and I sat down with them.

I said I got a couple weeks left, I am trying to buy this house. I know I am just kind of trying to squeak through banks, but they turned me down, this is what they said

Not all banks are created equal and there are different programs for different people. 

  • Let's see your situation. Well, needless to say, by the time I needed to close on the property, I got a loan. it was my first loan. And it wasn't the bank that I banked at that made it happen.

It wasn't the other banks on the corner that I saw, it was dealing with a broker.

This is what you are looking for, you are looking for a loan officer because a loan officer that has access to many banks is going to help you get pre-approved when maybe the banks you are most familiar with is not capable of giving you an approval.

Now listen, you can't take it personally, banks are dealing with millions of people and at the end of the day, they like someone's better than others. There are some banks that will work with low credit rating and other banks won't.

Understand this first and foremost that people can get so discourage in the lending process and you got to toughen yourself up and get some elephant skin on there and just not let that bother you so much. And the reason why is because there are all these banks and if you give up, you will never know what you were really capable of what you could have done.

Here is what banks are going to look at:

1. Debt To Income Rate

They are going to look at what are the ongoing monthly obligations that you owe people, what you owe car, what you owe on student debt and then they want to know how much leftover income do you have after you pay your bills. 

  • That will produce a debt to income ratio. How much debt do you owe versus how much money you make? And that is something that they are going to look at.

They are also going to look at what you have for a down payment on a property. If it's a home for you, I love taking advantage of the 3% and 5% down payment programs. You know on a $200,000 house, 3% is $6000.

But investor lending, you got to put 20% down. 3% versus 20%, so 3% that is awesome, if you buy a house with $40,000 of equity and you put $6,000 down when that deal is done, you are going to walk away feeling like a hero because you are going to make a pile of money. 

They also want to know is this for you living in the house or is this an investment. Because those are two very different banking systems. The lending rates and the things that you get when you are buying a home for you is more lenient with generally lower rates than buying an investment property.

  • Because the bank will say what is a higher risk? Micheal living in a house, or Micheal putting someone else in the house. If it's an investment property, it's higher risk. Your interest rate may be a full percentage higher, 1% higher, half percent higher. 

All of those things are what the banks are looking at including your hidden assets. 401k's, IRA's, any money that you have inequity and other properties. Money that you have in savings.

Those are all the considerations that are happening in the bank's sides.

Before you go find a loan officer, I want to share two very important things with you, 

1. Debt To Income Ratio

You need to have your debt to income ratio which means the money that is forcibly going out every month for obligations generally can't be more than 50% of how much you make. If it is, you are probably not going to get approved.

2. Credit Score

You got to have a credit score generally 680 or 700 or 720, some banks will work with you at a 620 credit score but if you are in the 500's then you need to use the alternatives bonus that I am going to share with you later. So you got to do some credit repair, get your credit maintained and up a little bit.

Read: How To Improve Your Credit Score Overnight

You Got To Have Enough For The Down Payment

You got to have enough for the down payment whether it's 20% or 3% as well as 5%, 4%, six months worth of payments in the banks.

  • Let's say that mortgage is going to be $80,000, the bank might want to see that after your down payment you still have $3,000 to $6,000 leftover in the bank, they are like, woo, something may happen to you, you can lose your job, you got a couple months before you get your next job and you can still make your payment and we as the bank we are not going down for it.

If you do fall into that situation of not getting approved by the banks, the second piece of advice I have for you is 

How Do You Find A Good Loan Office?

This is very important. Find a successful loan office. Successful means they do lots of volume with lots of banks. This is really important, you can't go to the brother-in-law that is the loan office. They can help you but if you want to be helped the most, you got to go to the most successful loan officers out there that every month do sign on many loans.

You are looking for one that is at least doing at least 5 or 8 loans a month and that means that they have experience.

If it's investment lending that you need, not your primary residence, then you need a final loan officer that specializes in investment lending.

  1. Ho many deals are they closing a month
  2. How many different banks do they work with?

The one that has the most volume and has the most banks is going to be able to open up the most doors for you. That is what you do to get pre-approved.

Where Do You Find Loan Offices?

That is easy. It's a really cool new technology called google which is super. Just google and start looking around and ask some people. Shoot, post on facebook, on social media. Anyone here knows a good loan officer? And then you can interview them when you find one.
  • How many banks do you work with
  • How many deals are you doing a month

They are going to feel that, that is a little bit invasive but it's all fair for you to understand that information so you can pick the right person to work with.

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